Cherry picking and lemon dropping does happen in value-based systems, but there has been work to address the issue. No simple answer, but basically you pay doctors more for select patients.
Within the context of the article though, if one assumes greedy doctors, then essentially cooperating doctors can cooperate to refuse treatment N times, where N is an equilibrium between the lemon-picking bonus and never accepting any patients at all (and therefore never having any revenue), in order to get the system to label non-lemons as lemons.
https://relentlesshealthvalue.com/audios/ep322/